Markets

Global gas demand is on the rise, erasing talk of a glut as China emerges as a giant consumer. Already the world's biggest oil and coal importer, China will also become the largest buyer of natural gas with net imports approaching the level of the European Union by 2040, according to International Energy Agency (IEA) estimates.

Closure of the large Rough storage has left the UK in a “precarious position” and “vulnerable” to gas supply shortages, Wood Mackenzie finds. Spot LNG cargoes can help cover demand at a short notice – but it would be imprudent to rely on flexible gas imports through the Interconnector, particularly as UK gas demand is bound to increase due to the government’s coal phase-out policy.

Germany-based RWE and Tokyo Gas, one of the world’s largest LNG buyers, have partnered on gas sourcing, trading and shipping. The two players agreed a framework for reducing costs through optimized shipping of US LNG, procured by Tokyo Gas.

Dynamics of the global energy transition are driven by the speed of electrification and the competition between flexible gas power plants and renewables plus energy storage. Margins in the downstream power market are becoming more attractive, as price discrimination allows for better value capture downstream than in the generation business.

Austria’s OMV is close to obtaining a stake in the development of Urengoyskoye, one of the world’s largest fields at the time of discovery in Russia’s Yamal region near the Arctic Kara Sea. A draft contract has been discussed by Gazprom chairman Alexey Miller and his counterpart at OMV, Rainer Seele that will see the Austrian utility participate in Urengoyskoye’s Blocks 4A and 5A.

As the world’s top oil company, ExxonMobil does not need to worry about size when it comes to snapping up assets. The Texas-based oil giant is tipped as a potential buyer of Endeavor Energy Resources, the largest privately-held oil and gas producer in the U.S. Permian basin – a takeover could cost over $10 billion.

Natural gas production in the United States is hitting new records after output increased to an average 86.9 Bcf/d in October, and continues to rise. In its Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) said 2018 production will average 83.2 Bcf/d, and is seen to top 89.6 Bcf/d in 2019. This supply glut is likely to push down prices at Henry Hub.

Rebounding oil prices are putting energy pricing reforms under pressure in some countries, with fuel subsidies creeping higher again after having fallen from a high in 2012 of more than a half trillion dollar. New IEA data for 2017 show a 12% increase in the estimated value of fuel subsidies, to more than $300 billion.

Advent International, a Boston-based private equity group, has acquired GE’s Distributed Power business and is now a stand-alone energy company, rebranded as INNIO. The transaction includes the Jenbacher and Waukesha product lines, with main operating sites in Austria, Canada and the U.S.

Coal exports from New South Wales, Australia, are seen entering a phase of “terminal long-term decline” as key buyers are turning away. Exports of thermal coal out of the Port of Newcastle peaked three years ago and analysts now observe a steady decline as Asian markets transition towards cheaper more sustainable renewables.

Fuel security has been politicized in the U.S. and PJM Interconnection has just passed a stress test, imposed by the U.S. Energy Secretary Rick Perry on all transmission system operators. Selecting 14-day period of winter weather, PJM analyzed the system under more than 300 different scenarios that might occur from 2023 onwards. “We could handle it, but need to focus on fuel supply and demand response,” said PJM President, Andrew L. Ott.

New York Public Service Commission (NY PSC) has approved a petition by Consolidated Edison Company (Con Edison) for a $5 million, three-year gas demand response pilot program, one of the first schemes of its kind. Industries and large commercial customers will get financial incentives to reduce gas consumption at times of peak demand.

Strong winds and plentiful sunshine has pushed up the renewables share in Germany to 43% in January, April and May – and with an average amount of wind in Q4-2018, renewables could cover 38% over the entire year. “Clearly, renewables are in the fast lane, while the contribution of conventional energy sources to cover gross power consumption is falling continuously,” said BDEW head Stefan Kapferer.

Canadian oil and gas producer Encana has a made its boldest move yet, buying all shares of Newfield Exploration for US$5.5 billion and assuming US$2.2. billion of Newfield’s net debt. The takeover gives Encana premium positions in three of North America’s highest-quality, oil and liquids-weighted shale plays – the Permian, STACK/SCOOP and the Montney.

India has just completing the electrification of all its villages, and worldwide over 120 million people gained access to electricity. This means that for the first time ever, the total number of people without access fell below 1 billion according to new data from the International Energy Agency’s (IEA) World Energy Outlook 2018.

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